"I do believe that it would be helpful for the FDIC to have the temporary ability to raise deposit insurance limits,'' Bair said today in a statement in Washington. She has discussed proposals with congressional leaders revising a $700 billion bank rescue after the House defeated the plan this week.
Bair didn't specify a size of the increase, the first since 1980, and said boosting coverage would give banks added liquidity and reassure depositors. U.S. Senate leaders have agreed to consider lifting the insurance coverage to $250,000 as part of the vote tomorrow on the Bush administration plan.
An increase in coverage to $250,000 would be insufficient to protect small- and mid-sized companies, former FDIC Chairman William Isaac said in an interview. The Treasury's recent step to guarantee all assets in money market mutual funds would leave banks at a competitive disadvantage, Isaac said.
The Washington-based agency also may seek to increase the $250,000 insurance limit on Individual Retirement Accounts. "That would be up to Congress to decide how it may break down in different categories,'' FDIC spokesman Andrew Gray said.